UK Taxation System Research Paper Example | Topics and Well Written Essays - 3000 words

UK Taxation System - Research Paper Example There are certain types of income that do not attract tax. They are benefits, income from tax-exempt accounts and special pensions. Residents of the UK are eligible for tax-free allowance called personal allowance, which is an amount of taxable income which the resident is allowed to earn each year. This allowance is free of tax. For the year 2008-2009, the tax-free amount is fixed at '5,435. If the individual is over the age of sixty-five, this amount is likely to increase. A registered blind person can claim tax-free blind person's allowance. Income tax is applicable on taxable income after the tax-free allowances. Certain deductible reliefs and allowance will reduce the tax bill of an individual. Some of the deductible allowances are married couple allowance, maintenance payment relief, and tax relief on pension, donations to charity based on gift aid or payroll giving. There are some other amounts which can be reduced from the tax bill. They are an allowance that decreases tax in retirement, tax advantages of personal pension and offers to charity (Income Tax, n.d). The revenue-raising methods of the UK government have come to debate with the abolition of 10 percent tax. The 10 percent tax was abolished to simplify the tax system. This is likely to affect the poor household which enjoyed limitations in paying tax. The reduction of the tax rate from 22 to 20 percent and the abolition of 10 percent tax are set to affect people whose annual income is less than '18,500. This initiative has raised argument because five million people who fall under the low earning group is targeted to raise more tax revenues. Simplification of tax is appreciable but the abolition of 10 percent requires identification of people who fall under the category and necessary benefits should be provided to help them. While families without children would be the worst effect, low-income families with children are expected to be in a better position. The tax reform will affect the already high cost of living of poor people (Abolition of 10 p tax, 2008).